The earnings call for Netflix, relating to the fiscal period ending on September 30, 2024, took place on October 17, 2024. Leading the conversation were Spencer Wang, Vice President of Finance, Investor Relations, and Corporate Development, alongside Co-CEOs Ted Sarandos and Greg Peters, and Chief Financial Officer Spence Neumann. The discussion began with a review of prepared remarks followed by responses to questions from analysts.
Spencer Wang introduced the call by reminding participants that forward-looking statements could lead to varying actual results. Eric Sheridan from Goldman Sachs posed questions regarding Netflix’s key investment priorities for 2025, how they have evolved, and how they anticipate their business will continue to thrive.
Ted Sarandos responded by expressing optimism for 2025, highlighting Netflix’s reacceleration of growth, evidenced by their financial performance, and their expected continued success owing to strategic planning. Netflix has maintained strong viewer engagement, witnessing an average of about two hours of viewing per member per day. As for future plans, Sarandos mentioned an exciting slate of upcoming content, including new seasons of popular shows like “Wednesday,” “Squid Games,” and “Stranger Things,” along with new productions from notable creators and fresh film releases.
Greg Peters added to the discussion by emphasizing Netflix’s commitment to continuous improvement of its services. He noted the importance of having a steady flow of successful content from diverse global markets and the promising developments in Netflix’s engagement strategies and enhancements to the product experience. Peters detailed Netflix’s ventures into areas like gaming and live events as part of its broader strategy for sustained growth.
Then, Jessica Reif Ehrlich from Bank of America inquired about factors contributing to Netflix’s revenue growth, considering membership growth, ARM increases, and advertising. Spencer Adam Neumann elaborated on these elements, projecting revenue growth to be primarily driven by new memberships, with augmented ARM growth contributing significantly as well.
Further questions centered on Netflix’s operating margin expectations, influenced by market conditions and strategic priorities, which Neumann affirmed would continue to grow annually. Discussion also arose about regional market dynamics, specifically the LatAm market, which Ted Sarandos and Spence Neumann assured was recovering well after experiencing challenges due to price changes.
Another focal topic in the conference was advertising. Steve Cahall from Wells Fargo sought insights on how advertising could become a more substantial growth component post-2025. Peters assured that while advertising is not currently their primary revenue source, Netflix sees it as a significant growth avenue, supported by growing CPM rates and a positive trajectory.
In response to questions from analysts, the call also addressed Netflix’s partnerships with ad-tech platforms like The Trade Desk and Google, and how Netflix intends to enhance its ad partnerships moving forward. Netflix’s leadership explained that these alliances help streamline ad purchasing and reach goals while underscoring the company’s broader strategy of retaining flexibility to adapt as necessary.
Regarding content and engagement, Ted Sarandos acknowledged the impact of recent Hollywood strikes on Netflix’s production schedule, with the company striving to normalize its output by mid-2025. He discussed the platform’s commitment to providing a continuous stream of high-quality content, ensuring stable engagement, and leveraging innovative programming, including live events, to capture audience interest.
There were also questions concerning pricing strategies, which Peters addressed by emphasizing the company’s long-standing approach of pricing based on value delivery to members rather than competitor actions, and ensuring that Netflix continues to offer a range of plans without excessive complexity.
Discussing capital allocation, Neumann delineated Netflix’s focus on profitable growth, returning excess cash to shareholders, and maintaining liquidity without setting any specific leverage targets.
Questions about competition with platforms like YouTube arose, where Sarandos and Peters distinguished Netflix’s strengths in premium content and its capability in delivering substantial value both to creators and consumers.
Finally, the notion of bundling with other streaming services was raised by Michael Morris of Guggenheim. Sarandos highlighted Netflix’s strategy of adding value through its standalone offering and expanding its content and service diversity, rather than seeking bundling partnerships.
Throughout the call, the Netflix leadership team communicated confidence in their diverse strategies and upcoming offerings, emphasizing a consistent ambition to grow engagement, subscriber numbers, and overall market share across the global streaming landscape.
